Developer buys back his own property

PARK CITY — In a highly unusual bankruptcy outcome, the developer of a luxury golf community near Park City bought it back for pennies on the dollar Friday because the leading creditor was unable to scrape together a bid and nobody else was interested.

Promontory was sold for just $30 million to a developer who defaulted on $275 million in loans packaged by Credit Suisse and sold to hedge funds and other investors.

A Credit Suisse spokesman didn't dispute the loss but wouldn't comment. Dallas-based Highland Capital Management, a hedge fund that owns about 30 percent of the loans, said the property wasn't worth buying in part because the developer was allowed to dig a deep financial hole during bankruptcy.

Highland bought its loans at a discount, suffered a smaller loss than indicated and made up for those losses with other investments, said a company representative who spoke on condition of anonymity because he didn't want to anger the firm's clients.

Francis Najafi, chief executive of Phoenix-based Pivotal Group, emerged triumphantly from a courtroom Friday as the same owner of Promontory, where more than 350 multimillion-dollar homes have already been built. Members pay hefty fees for golf and other amenities, including opulent lodges and a warehouse-size horse stable. Najafi kept operations going during a yearlong bankruptcy.

Another 1,500 building lots are available across a sprawling sagebrush-covered hill overlooking the ski town of Park City. Najafi said he believes sales will pick up in a year or two, making Promontory viable again.

Najafi insisted the bankruptcy was not his doing. A group of creditors who forced the bankruptcy said he stopped paying loans in December 2007. Najafi countered that Credit Suisse agreed to loan money he says he didn't even need and that the bank was a victim of its own excess.

"Ultimately, I believe in the magic of America," said Najafi, an Iranian-born, self-made real-estate tycoon who believes the market for expensive second homes will come back. "There is no question in my mind that the economy will recover," he said.

Credit Suisse had matched Najafi's $30 million bid at an auction on Wednesday but, unable to raise even that amount, it withdrew the bid a day later. The takeover required a buyer to raise millions more to keep operations at Promontory going. The project was shopped to 80 potential investors, none of whom ventured a bid.

Najafi said he'll have to spend about $70 million before Promontory recovers.